Correlation Between Element Fleet and DIRTT Environmental

Can any of the company-specific risk be diversified away by investing in both Element Fleet and DIRTT Environmental at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Element Fleet and DIRTT Environmental into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Element Fleet Management and DIRTT Environmental Solutions, you can compare the effects of market volatilities on Element Fleet and DIRTT Environmental and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Element Fleet with a short position of DIRTT Environmental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Element Fleet and DIRTT Environmental.

Diversification Opportunities for Element Fleet and DIRTT Environmental

0.59

Correlation Coefficient

Element Fleet  DIRTT Environmental

Very weak diversification

The 3 months correlation between Element and DIRTT is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Element Fleet Management and DIRTT Environmental Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DIRTT Environmental and Element Fleet is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Element Fleet Management are associated (or correlated) with DIRTT Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DIRTT Environmental has no effect on the direction of Element Fleet i.e., Element Fleet and DIRTT Environmental go up and down completely randomly.

Pair Corralation between Element Fleet and DIRTT Environmental

Assuming the 90 days trading horizon Element Fleet is expected to generate 6.63 times less return on investment than DIRTT Environmental. But when comparing it to its historical volatility, Element Fleet Management is 3.91 times less risky than DIRTT Environmental. It trades about 0.08 of its potential returns per unit of risk. DIRTT Environmental Solutions is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  71.00  in DIRTT Environmental Solutions on September 3, 2024 and sell it today you would earn a total of  30.00  from holding DIRTT Environmental Solutions or generate 42.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Element Fleet Management  vs.  DIRTT Environmental Solutions

Element Fleet Management

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Element Fleet Management are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Element Fleet is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

DIRTT Environmental

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DIRTT Environmental Solutions are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, DIRTT Environmental displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Element Fleet and DIRTT Environmental

The main advantage of trading using opposite Element Fleet and DIRTT Environmental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Element Fleet position performs unexpectedly, DIRTT Environmental can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in DIRTT Environmental will offset losses from the drop in DIRTT Environmental's long position.

The idea behind Element Fleet Management and DIRTT Environmental Solutions pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.